Rasia FZE and Joseph K. Borkowski v. Republic of Armenia

Case summary

At a glance

Parties: Rasia FZE (United Arab Emirates) and Joseph K. Borkowski (United States) v. the Republic of Armenia
Case no.: ICSID Case No. ARB/18/28 (Annulment Proceeding)
Forum and rules: ICSID Convention annulment proceeding (Article 52); ICSID Arbitration Rules 2006
Treaty: USA–Armenia BIT (signed 23 September 1992, in force 29 March 1996); 2012 Southern Armenia Railway and High Speed Road Concession Agreements
Committee: Ms. Loretta Malintoppi (President), Ms. Adedoyin Oyinkan Rhodes-Vivour, Professor Hi-Taek Shin
Sector: Transport infrastructure; railway and road concessions
Outcome: The ad hoc Committee unanimously rejected the application for annulment in its entirety and terminated the stay of enforcement (5 November 2024).
Amount: Award under review: claims dismissed and claimants ordered to pay Armenia USD 2,783,250.09 in costs. Annulment: the Applicants bear all costs of the proceeding (USD 407,432.36) and pay Armenia's legal fees and expenses of USD 382,248.00, plus simple interest at the US Prime rate. The Applicants had claimed their own costs of USD 1,581,024.86.

The dispute

Rasia FZE, a UAE company, and its US shareholder Joseph K. Borkowski challenged Armenia's conduct concerning two infrastructure projects in southern Armenia. These were governed by the Railway and Road Concession Agreements of 28 July 2012. The claimants alleged breaches of the Concession Agreements and of the USA–Armenia BIT: fair and equitable treatment, arbitrary measures, expropriation and the umbrella clause. In its Award of 20 January 2023, a tribunal of Jean E. Kalicki, John Beechey and J. Christopher Thomas dismissed all claims. It held Rasia's contract claims and Mr. Borkowski's umbrella clause claim time-barred under the three-year limitation period of the Armenian Civil Code, and rejected the other BIT claims on the merits. The claimants sought annulment for manifest excess of powers, serious departure from a fundamental rule of procedure and failure to state reasons. Their main arguments were that the limitation period was procedural and outside the parties' choice of "substantive Legislation", that the Tribunal invented a "wrongdoing" requirement for interrupting the period, and that they were never heard on the Tribunal's own interpretation.

Key holdings

No manifest excess of powers in applying the Armenian limitation period. The choice of "the substantive Legislation of the Republic of Armenia" in Article XVIII (67) of the Concession Agreements covers Armenian law as a whole, including the Civil Code. No carve-out of procedural rules is apparent. The parties had also agreed in the Arbitration that Articles 332, 337 and 340 of the Civil Code applied. ¶¶ 137–140
The argument that limitation is procedural under Armenian law, relying on Article 168 of the Civil Procedure Code, was not put to the Tribunal and cannot be raised for the first time on annulment. The Tribunal did not declare the claims "extinguished". The word appears only once, at Award ¶ 471, in a general remark on umbrella clauses. ¶¶ 143–144
The Tribunal did not replace "debt" with "wrongdoing" or create new legal requirements under Article 340(1). Its references to wrongdoing were examples used in assessing the evidence. Its decisive finding was that the claimants did not rely on Armenia's statements and pushed forward with litigation. Any misinterpretation was not so gross as to amount to a failure to apply the proper law. ¶¶ 166–169
The start date of 18 March 2015 was not arbitrary. It was the claimants' own valuation date, the date on which they said their investments were irreversibly lost. The 10-year period for corruption-related claims under Article 333(1) of the Civil Code was never raised in the Arbitration and cannot support annulment. Refusing to compel the former minister's testimony was not unequal treatment. ¶¶ 149–155
No serious departure from a fundamental rule of procedure. Limitation was a live issue that both parties argued at every stage of the Arbitration. A tribunal may adopt its own interpretation without first consulting the parties if it stays within the legal framework they established (Klöckner I). A tribunal is under no duty to ask questions to fill gaps in a party's case. ¶¶ 185–189, 218–227
No failure to state reasons. The Tribunal clearly explained why it gave general views on the time-barred contract claims: they were interwoven with Mr. Borkowski's remaining BIT claims. It also explained why it chose 18 March 2015 as the start date. ¶¶ 250–253
Costs follow the event. The Applicants bear all costs of the proceeding (USD 407,432.36) and the entirety of Armenia's legal fees and expenses (USD 382,248.00), with simple interest at the US Prime rate from the date of the Decision. LIBOR has been discontinued, so the Committee used the Prime rate instead. ¶¶ 269–276

Procedural history

28 July 2012Rasia and Armenia conclude the Railway and Road Concession Agreements.
19 July 2018Arbitration commenced.
February–April 2021Hearing in the Arbitration, held over 16–26 February and 26–27 April 2021.
20 January 2023Award: all claims dismissed; the claimants ordered to pay USD 2,783,250.09 in costs.
19 May 2023Application for annulment filed with a request for a stay of enforcement. ICSID registers it on 2 June 2023 and provisionally stays enforcement.
4 July 2023ad hoc Committee constituted.
16 October 2023Decision on Stay of Enforcement: stay extended on condition that the Applicants provide a bank guarantee or security bond.
December 2023–January 2024Revised Stay Decision of 22 December 2023 finds the Lazarus demand guarantee inadequate. New Stay Decision of 25 January 2024 accepts the security bond and maintains the stay.
2–3 July 2024Hearing on annulment in Washington, D.C.
5 November 2024Decision on Annulment (signed 4 November 2024): application rejected in its entirety, stay terminated, costs against the Applicants.